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Funding questions

CHANNEL TUNNEL Rail Link operator London & Continental Railways this week continued to douse speculation that Railtrack was poised to weigh into the project with a cash injection.

While LCR admits that discussions are ongoing with the rail operator over its potential involvement, a spokesman this week reiterated that talks were also being held as a matter of course with 'a number of other interest parties'.

'We are very keen to see whether a beneficial deal can be done with Railtrack or anyone else,' the spokesman said. 'We have a duty to our shareholders to examine each proposal.'

LCR is still working towards its mid-1998 date for flotation but maintains that funding is in place to keep construction moving on target regardless of this date. However, LCR acknowledges that expenditure will start to rocket once tunnelling contracts are signed in April and orders for TBMs and other equipment are placed. Addition sources of equity, if not critical, will be useful.

In the meantime, the key to LCR's successful cash-raising flotation is convincing the City that RLE can bring the project in on time and to budget and that the Eurostar train service to the Continent is delivering strong enough cashflows.

Last week LCR sought to encourage investors by announcing that the Eurostar train service increased passenger levels by 20% to 6M in 1997. Further passenger growth is expected this year following the start of the service to the French Alps and the opening of the dedicated high speed track between Lille and Brussels last month.

Meanwhile the 'pain sharing and gain sharing' target price construction contracts, should help LCR convince about its ability to deliver the rail link without time and cost overruns.

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